Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Unum Group (5513) 10-K published on Feb 19, 2019 at 4:37 pm
Reporting Period: Dec 30, 2018
Negotiations regarding the U.K.'s plans to leave the EU on March 29, 2019 are ongoing and the anticipated resolutions remain uncertain. The magnitude and longevity of potential negative economic impacts on the growth of our Unum UK business will depend on whether an agreement is reached between the U.K. and EU as a result of exit negotiations and, if reached, the nature of the agreement and the resulting response of the U.K. marketplace. We do not expect that the underlying operations of our U.K. business to be significantly impacted by the U.K.'s exit from the EU. The insurance policies issued by our U.K. insurance subsidiary are almost exclusively written in the U.K. and cover policyholders based in the U.K. These policies will not be affected by the U.K.'s exit nor will we need to obtain additional insurance licenses to be able to continue writing these policies. For the small amount of contracts and coverages provided to companies and individuals outside of the U.K., we have developed contingency plans that could be invoked following the U.K.'s exit. The employees that support our U.K. business reside in the U.K. and will not need to change residence status after the exit. We may experience volatility in the fair values of our investments in U.K. and EU-based issuers, but we do not expect a material increase in other-than-temporary impairments or defaults, nor do we believe this volatility will impact our ability to hold these investments. We may also experience higher claims incidence in the near term, which is generally correlated to periods of economic uncertainty. Additionally, it is possible that there are tax impacts associated with the exit such as revised or new tax regulations. The continued dampening of growth due to the current disruption and uncertainty in the U.K. economy may lead to lower near-term sales and premium growth. There are currently no indications that capital requirements for our U.K. operations will change, but economic conditions may cause volatility in our solvency ratios. Our reported consolidated financial results may be unfavorably impacted by the weakening of the British pound sterling relative to preceding periods.
We store confidential information about our business and our policyholders, employees, agents and others on our information technology systems, including proprietary and personally identifiable information. As part of our normal business operations, we use this information and engage third-party providers, including outsourcing, cloud computing, and other business partners, that store, access, process, and transmit such information on our behalf. We devote significant resources and employ security measures to help protect our information technology systems and confidential information, and we have programs in place to detect, contain, and respond to information security incidents. However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we and our third-party providers may be unable to anticipate these techniques or implement adequate preventative measures. In addition, hardware, software, or applications we develop or procure from third parties or through open source solutions may contain defects in design or manufacture or other problems that could unexpectedly compromise our information security. Unauthorized parties, whether within or outside our company, may disrupt or gain access to our systems, or those of third parties with whom we do business, through human error, misfeasance, fraud, trickery, or other forms of deceit, including break-ins, use of stolen credentials, social engineering, phishing, or other cyber attacks, computer viruses, malicious codes, and similar means of unauthorized and destructive tampering.
At December 31, 2018, we held two below-investment grade fixed maturity securities with a gross unrealized loss greater than $10.0 million. One security is related to a global pharmaceutical company and had a fair value of $61.5 million and a gross unrealized loss of $15.5 million. The other security is related to a U.S. based oil and natural gas producer and had a fair value of $5.0 million and a gross unrealized loss of $11.0 million. We also held one investment grade fixed maturity security at December 31, 2018 related to a large U.S. based utility with a fair value of $99.5 million and a gross unrealized loss of $7.3 million which, in January 2019, filed for reorganization under Chapter 11 in the U.S. Bankruptcy Court and was downgraded to below-investment grade. We intend to and have the ability to continue to hold these securities to maturity and believe that the declines in fair value are temporary.
In connection with our acquisition of Pramerica Zycie TUiR S.A., (which we have subsequently renamed Unum Zycie TUiR S.A. and refer to as Unum Poland) in the fourth quarter of 2018, we changed the name of our Unum UK segment to Unum International. The Unum International segment is now comprised of our Unum UK line of business and the newly acquired Unum Poland line of business. See "Acquisitions of Business" below for further information. Unum UK's business includes insurance for group long-term disability, group life, and supplemental lines of business which include dental, individual disability, and critical illness products. Unum UK's products are sold primarily in the United Kingdom through field sales personnel and independent brokers and consultants. Unum Poland's business primarily includes insurance for individual and group life with accident and health riders. Unum Poland's products are sold only in Poland, primarily through a combination of independent agents and field sales personnel. Unum Poland 's results are included within the supplemental product of the Unum International segment in U.S. dollars.
As permitted by the Securities and Exchange Commission, we have excluded from the scope of our assessment of internal control over financial reporting the operations and related assets and stockholders' equity of the companies we acquired during 2018. At December 31, 2018, the combined total assets and total stockholders' equity for these companies constituted $364.8 million and $154.2 million of the Company's total assets and total stockholder's equity, respectively, while total combined revenues and net loss constituted $19.5 million and $1.4 million of the Company's total revenues and net income, respectively, for the period from the date of the respective acquisitions through December 31, 2018. See "Executive Summary" contained herein in Item 7 for further information.